(Feb-24) Germany’s recent high-stakes election saw conservative opposition leader Friedrich Merz win comfortably, signaling a shift towards increased spending and ending an era of constrained fiscal policy. The euro rose by 0.7% in Asian trading following the election results.
In commodities, oil prices declined due to the prospect of increased supply from Iraq, while gold traded near last week’s all-time high, driven by weak economic data and rising inflation expectations.
The rand faced some headwinds at the back on load-shedding announcement to stage 6, now at stage 4.
Against the crosses:
Key events today:
(Feb-19) President Donald Trump announced plans to impose 25% tariffs on automobile, semiconductor, and pharmaceutical imports, with an announcement expected by April 2. He aims to give companies time to establish US-based operations to avoid tariffs. These new levies could significantly impact industries and lead to higher consumer prices, particularly affecting countries like Mexico, South Korea, Malaysia, and Singapore.
(Feb-24) The Trump administration has taken several actions against China, increasing the risk of worsening ties. President Trump issued a memorandum to curb Chinese investment in strategic American sectors and urged Mexico to levy Chinese imports. The US also proposed fees on Chinese-made commercial ships. These moves led to a drop in Chinese shipping stocks and fluctuations in the CSI 300 Index, while the yuan rose 0.2% against the dollar, now trading at 7.2435.
(Feb-17) The Rand remained stable at 18.32 against the $ after a volatile week, initially weakening due to the national budget postponement but recovering with rising global gold prices. The budget delay, caused by disagreements over a proposed VAT increase, is unprecedented and creates uncertainty ahead of the mid-March presentation. Markets are watching for debt consolidation and expenditure cuts in the revised budget.
Over the weekend, we saw a return of load-shedding to stage 6 but Eskom has announced a reduction to stage 4, effective from 00h30 on Monday, February 24th. This decision follows the successful return of most downed units, which has improved the power supply situation.
On the positive side: SA may be eligible to exit the FATF gray list in October, having addressed 20 of 22 items required for delisting. The National Treasury confirmed significant progress in improving the country’s financial security systems, with only two items remaining to be addressed. This progress has been acknowledged by the FATF, which will consider SA’s delisting in its upcoming October review.
(Feb-19) Saw volumes picking to their highs at the back of the postponement of the budget speech.
(Feb-24) volumes fluctuated around the recent ADV last week, with an uptick on Wed (19-Feb) after budget was postponed to 12 March.
(Feb-21) Rand looks set to trade 18.30 with the latest implied support at 18.05 and before that it was 18.25.
(Feb-24) Clients are happy to be short USDZAR below 18.50, otherwise they are long all the way to 18.85.
(Feb-20) Growing optimism on ZAR, in-fact both importer and exporters happy to trade at these lvls. Both dealing in big tickets.
(Feb-24) Rand opens slightly under pressure today.
(Feb-24) Clients are happy to be short USDZAR below 18.50, otherwise they are long all the way to 18.85.
(Feb-20) The ZAR seems to now be benefit fitting from a weaker $ environment which is also coupled with Gold hitting all time highs and the confirmation by the President that there won’t we a fallout in the GNU following the budget issue.
(Feb-24) Rand held the 18.35 VWAP lvl and the 18.50 - 18.25 range. Importers are happy to trade at these lvls while exporters are staying on the side-lines.
By Thuto Mukena - Institutional Sales Specialist (Feb-24)
Local vols ended Friday’s session lower, with the 1-week implied vol tenor down 1.34 vol pp from the open, as the 1-week volatility risk premium remained below its 1-week average. With key risk events in the rearview, market participants looked to wrap up the week on a quieter note.By Friday, the market had largely digested the postponed Budget, tempering vol expectations further. Meanwhile, the ZAR maintained upward momentum, closing the week firmer at R18.3269/$. Looking ahead, this week’s key local risk event is a sticky CPI, expected at 3.3% y/y, up from the prior 3.0% print.
Peace talks remain in the headlines, with Ukrainian President Zelensky indicating he’d step down if Ukraine were admitted into NATO and peace was restored. The USD momentum remained bumpy but broadly lower, additionally the weaker S&P data dropping to a 17-month low of 49.7, which supported a further push lower in the greenback. This week’s focus shifts to U.S. GDP, where consensus remains steady at 2.3% y/y, with markets watching closely for any signs of economic softening. On the implied vol front, implied vols across G10 and EM traded cautiously amid the uncertainty on Friday, lacking a clear direction. USD/CAD and USD/CHF 1-week implied vols edged higher by 40bps and 35bps, respectively, while most other pairs saw vols offered. In the high-beta space, USD/MXN was the standout, with its 1-week tenor closing slightly higher, up 13bps from the open.
By sizwe Mfayela - Institutional Sales Specialist (Feb-24)
Economic data releases